KUALA LUMPUR (Feb 23): IHH Healthcare Bhd sees its record performance in 2021 as a “springboard year” for future growth positioning and the development of its laboratory business, its executives said.

Speaking at IHH’s results briefing, its managing director and chief executive officer Dr Kelvin Loh said a recovery in patient volume and the successful execution of the group’s strategy — which was laid out at the start of the pandemic — will improve the group’s efficiency and balance sheet going forward.

Notably, the influx of returning patients together with contribution from Covid-related services and improvement in operating costs helped IHH beat consensus earnings forecast in Dec 31, 2021 (FY21) by 18.05%.

The group saw a 545% surge in its FY21 net profit to a record RM1.86 billion or 20.2 sen per share from RM288.88 million or 2.27 sen per share a year earlier.

Its full-year revenue rose 28% to RM17.13 billion from RM13.4 billion, thanks to improvements across all healthcare segments, including its operations in Turkey, as its natural hedging helped brush off the sharp weakening of the lira.

For the fourth quarter ended Dec 31 (4QFY21), IHH net profit rose 8.16% to RM453.6 million from RM419.36 million with revenue rising at a faster rate of 18.7% to RM4.47 billion from RM3.77 billion.

The group declared a dividend of six sen per share for the year, up from four sen in FY20.

As at end-2021, IHH improved its net debt-to-ebitda to 1.37 times from 2.42 times at the start of the pandemic.

Its net operating cash rose to RM3.53 billion in FY21, from RM2.44 billion in FY20, with IHH describing its core operations as having “reached a new level of sustainability”.

“Now we have a very strong balance sheet to accelerate our journey through acquisitions,” said Loh.

The group intends to further expand in geographical clusters which they are already established in, or venture into new adjacent markets where it has a brand presence, Loh said.

“[The cluster strategy] is simply more capital-efficient,” Loh said. “If indeed there are assets that do not fit into the strategy — maybe they are not delivering the returns that we are looking for, or they are in areas where we are not improving — then we might look to divestments and put capital back into clusters [where] we are strong,” Loh added.

It is also looking into growing its laboratory segment — with 400 labs across the group — which contributed RM2 billion in revenue in FY21.

Meanwhile, group chief financial officer Joerg Ayrle said IHH “will stay” and “is committed to China" with the group still looking into “new ways of working” to improve its operations there, which was the only loss-making division in FY21.

The group said in November that there were discussions on the strategic directions of its investments but no decision has been made yet, amid reports that it is weighing the sale of Parkway China which could value the unit at US$1 billion.

“We do need to find new ways to be successful. We have worked very hard to turnaround operations, a lot of things have been done operationally. We need to find new ways and potentially new partnerships,” Ayrle said.

“The key question is how we can find the right partner to be successful in the long run,” said Ayrle.

IHH still sees headwinds in the near term amid the tapering of contribution from Covid-19-related services, which accounted for about 15% of the group’s revenue in 2021. Cost pressure from inflation, and staff recruitment and retention could also eat into performance in 2022.

However, the group also expects to see further recovery of inpatient admissions, namely in its leading market Singapore.

Shares of IHH traded unchanged at RM6.30, giving it a market capitalisation of RM55.43 billion.